College Education is the Real Bubble Plaguing the United States

Peter Thiel Bets $2.4 Million Against the Value of a College Degree

May 25, 2011

The Atlantic Wire - In case you missed our save-the-date post a few weeks ago you might've forgotten about the Peter-Thiel-hates-college party yesterday. In announcing the first group of Thiel Fellows--two dozen kinds under 20 who will receive $100,000 to drop out of school and work under his mentorship--the PayPal founder and angel investor hopes to make a statement not only about America renewing its commitment to innovation but also about how getting a college education is the real bubble plaguing the United States. Thiel told The New York Times's Bits Blog:

I believe you have a bubble whenever you have something that’s overvalued and intensely believed… In education, you have this clear price escalation without incredible improvement in the product. At the same time you have this incredible intensity of belief that this is what people have to do. In that way it seems very similar in some ways to the housing bubble and the tech bubble.

According to a well-timed study from Georgetown University's Center on Education and the Workforce, however, Thiel's assumptions are way off base.

“The bottom line is that getting a degree matters, but what you take matters more,” said Anthony P. Carnevale, the Center's director in a press release.

As The Atlantic's Derek Thompson argues, though, the study serves to highlight not how computer scientists earn exponentially more than teachers, but how education is an investment that, on average, pays off big dividends across the board. Here's a chart of median incomes with degrees from the Georgetown study, though the Chronicle of Higher Education has a better, interactive graphic with the results.

In their coverage of Thiel's new initiative, the Times highlights the appeal for the newly appointed fellows to choose dropping out over matriculating.

“There’s a lot of other stuff that you get in college and I would say that would be useful for John,” proud father of grant recipient John Burnham told the paper. “But I would say in four years there’s a big opportunity cost there if you could be out starting your career doing something that could change the world.”

John Burnham first learned about Peter Thiel in the movie The Social Network, where Wallace Langam portrays the investor as a voice of reason in the Facebook founders' quest for dominance.

The Times blog The Choice featured it yesterday. The post's leads with a quote from Georgetown's press release:

The good news? “While there is a lot of variation in earnings over a lifetime,” the center said in a press release, “the authors find that all undergraduate majors are ‘worth it,’ even taking into account the cost of college and lost earnings.”

Thiel is used to being a contrarian, but his naysaying young people getting college education may not be the latest scandal. As The Awl's Choire Sicha noticed today, out of the 24 reciepients of Thiel Fellowships, only two are women.

Sources:

• Want Success in Silicon Valley? Drop Out of School, Claire Cain Miller, New York Times
• College Students Deserve to Know What Degrees Will Pay, Derek Thompson, The Atlantic
• Calculating the Potential Return on Your Major, Jacques Steinberg, New York Times